Head of EU Delegation’s Speech at Annual Conference: Changing landscape of EU-China economic and trade relations Go back »

2015-12-03 | All chapters

Dear EUCCC President Joerg Wuttke,

Dear Colleagues Ambassadors

Dear President Designate Jin Liqun,

Ladies and Gentlemen,

It is my great pleasure to be here today with you, again, on the occasion of the 3rd Annual Conference of EUCCC, which has quickly become an important event for business, media and top policymakers in the EU and China.

For me, this is also an opportunity to look back on celebrations of 40 years of diplomatic relations between the European Union and China. Much mutual benefit has been achieved. As global actors we have significantly expanded our cooperation, including in the political and security domain. And as top economic partners we remain fundamental sources of growth, mainly through trade in goods, which makes our trade relationship one of the world's most important one.

But as China’s economy reshapes, transiting to a new and more sustainable model, and the Chinese leadership redefines its participation in the world order, we should not look back but rather focus on how we can take our relationship forward. 2015 might already be a first test for this new era.

The extent to which we will be able to find synergies and common ground on our respective flagship policies, on investment, innovation, and international governance will determine in large measure the depth of our future relationship.

The first dimension of this docking of policies is investment.

2015 has seen intensified negotiation of CAI.

As underlined in the Commission's Trade Policy Communication “Trade for All”, this is the central project of our trade agenda to power the two areas of vast untapped potential: investment and services (two thirds of services are delivered via establishment, ie investment). Our goal is a joint consolidated text by the end of this year, with 8th Round of negotiations taking place as we speak. If we are to make real progress, we have to increase market access for each other, to give our companies ambitious additional opportunities on a reciprocal basis.

Recent trends here send us the following messages:

(1)   strong growth in Chinese investment in the EU underlines the importance for China of (i) state-of-the art investor protection and also of (ii) an open EU  market;

(2)   more mitigated growth of EU investment in China indicates not only the impact of slowing Chinese economy, but the effect of regulatory barriers. If China wishes to continue to attract high- quality EU investment, it should take immediate measures to ensure a fair and open business environment. For example, after 2 years of testing in FTZ, opening up should be accelerated irrespective of the CAI negotiations, and of China’s testing of a negative list approach for domestic investment (begins formally today).

An ambitious CAI would also help to develop synergies between two flagship initiatives: EIP and OBOR

We see keen Chinese interest to participate in the EFSI and are currently working on the modalities in a joint WG. More broadly, on transport infrastructure, but also energy, cyber-links, the regulatory framework etc, we have set up a joint Connectivity Platform. The objective is to match our respective priorities.

We are happy for China to contribute to Europe's  infrastructure development in a broad sense. This involvement will have to respect EU rules (eg procurement, fair pricing) and policies (eg transport corridors). On this basis we see huge potential to energise investment, align policy and enhance cooperation across Europe and Asia.

The second dimension of policy coordination concerns innovation.

The Chinese Government has clearly articulated its reform vision to move the Chinese economy up the value chain, and innovation is to be one of the most critical drivers. The EU is ready to support this agenda. But this requires a business environment which offers fair and transparent conditions for all economic actors in China.

The most recent EUCCC Business confidence survey showed keen desire for EU companies to localise deep R&D in China if strong IPR protection, an end to forced technology transfer, and equal participation in standardisation bodies and R&D funds are guaranteed.   This is why we have reinforced our IP partnership (one of the key outcomes of the June EU-China Summit), raising the political profile and strengthening content with a focus on the most challenging area: enforcement.

Another marriage of flagship initiatives took place in the High Level Economic and Trade Dialogue in September: the Joint Declaration on Strategic Cooperation in 5th Generation Mobile Communication Networks”. This is a potential blueprint for future EU - China collaboration, based on reciprocal opening in research and standardisation in the global race to establish a 5G communications network standard.

China’s  role  in  international  financial,  trade  and  economic architecture attracts large attention by commentators and policy makers alike. The EU has given ample evidence of our policy to welcome an enhanced, constructive and responsible role by China. We supported higher participation in IFIs, welcome China's membership in EBRD, participate in AIIB with many of our Member States being founding members, and build bridges for China’s participation in important international trade negotiations like TiSA. The common denominator is: The EU supports China’s growing role in international governance. At the same time we expect China to assume its responsibilities in line with the benefits it draws from international system.

We want to work together with China to:

-reach an agreement this month in Paris during the COP21 on ambitious, binding international commitments to fight climate change.

-reach robust deals in MC-10 in Nairobi in the trade area, namely in WTO negotiations, in further liberalisation of information technology products, in liberalisation of environmental goods, and also in advancing China’s process to join global procurement rules;

- and we want to work closely with China during its hugely important G20 presidency – which starts today - to make substantial progress on financial reform, economic governance, and international policy coordination.

This attempt to dock policies in a deeper way than ever before occurs at a crucial time in China's reform process. The language of the new Five Year Plan testifies yet again to the Chinese leadership's awareness of the need for comprehensive reforms to achieve the required rebalancing of the economy and to boost potential growth, thanks to the enhanced role of the market, opening up, innovation, rule of law. A swift implementation of the reform agenda would improve resource allocation and facilitate the transition to more sustainable growth.

However, there are signs that domestically China's trade and investment policies are becoming partly more restrictive. In light of the gradual slowdown of the economy, there could be the danger of a "closing up" reflex. Recent steps, e.g. in the guise of the National Security Law, the Draft Cyber Security Law, the draft foreign NGO law, indigenous innovation and domestic support provisions in "Made in China 2025", or latest regulatory proposals in the banking and insurance sector, which under the pretext of national security introduce restrictive rules for the provision of core ICT services, are a cause for concern.

Overcapacity continues to be a fundamental problem, for example in the steel sector, and SOE reform leaves at this stage more questions than answers as to how it will affect the business environment for foreign companies.

This may lead to significant restrictions on trade, investment and expert exchanges with China. Paradoxically, this development could undermine China's growth and deprive China of essential tools to achieve its reform goals. Such policies would drive away rather than attract international investment in R&D and the best technological solutions from all over the world.

This is why COM new Trade Policy Communication underlines the paramount importance of the successful implementation of reforms in China. Together with (i) the conclusion of ambitious CAI and Geographical Indications agreements, and with (ii) the ambitious role of China in international trade negotiations I have mentioned, firmly advancing reform would contribute to a more balanced relationship, and help build the right conditions for eventual FTA negotiations.

I would like to finish by paying tribute to EUCCC. You are the practitioners who make trade and investment (still the most important part of our relation with China) happen. What’s more, EUCCC is "the voice" of EU business in China, both for Chinese authorities and for Brussels. Your upcoming trip to Brussels and EU capitals in January to present the Position Paper will again be a major input for the EU's top decision makers.

I want to send you a clear message:

Our decision-makers design policies to support our business stakeholders.  This  is  why  we  need  and  value  EUCCC's input, especially at grassroot level, from your working groups and your local chapters. This input is crucial in identifying and tackling market access barriers, designing the best possible outcome for endeavours like the on-going EU-China Investment Agreement negotiation. You know that you can count on our support, and I know that we can count on your support, to reach an even deeper relationship with China to the continuing benefit of our companies and citizens.

Thank you for your attention and I wish you a successful conference.